5 Smart Ways To Invest in Online Share Trading

You must open a trading account online to do share trading. Without opening a demat account you cannot invest in stock markets. There are many players in the market offering demat services from full service and discount brokers. Their websites will run you through the process of Open a Demat account online at zero charges. You can opt for low brokerage subscription plans to lower your transaction costs.

Now let us understand some smart ways of creating wealth from online share trading.

Five Smart Ways to Grow Money with Online Share Trading

1. Start as early as possible

Direct equity investments do give decent returns in the short run but they give substantial capital gains only in the long run. As per many stock market experts, you should remain invested in shares for the longest possible time to multiply your wealth phenomenally. A long investment time horizon helps you to tap the true power of compounding. Tax benefits also accrue in the long run.

The younger you are the better when you start online share trading. Initially, invest only in large cap stocks as they consistently give higher inflation adjusted returns at lower risks. Once you gain expertise in online share trading, you can opt for riskier stocks with high return potential.

2. Monitor performance of your shares minimally

You should never track stock returns continuously. Infact invest in stock markets and forget about it for a decade or more, if possible. While markets are very volatile, the bulls and bears will get auto corrected in the long run.

Also Read: What is the best strategy for intraday trading in Bank Nifty?

This will also save you from anxiety and panic attacks when markets are experiencing a downslide or recession. As mentioned in previous paragraphs, shares are long-term investments that will show their real earning potential only in the long run.

3. Hedge your risks and diversify your portfolio

“Do not put all eggs in one basket” is the fundamental tenet of investing. Your investment portfolio should be a good mix of debt, equity and other risk-free instruments like Fixed Deposits etc.

Even in online share trading, you should hold a stock portfolio which is a good mix of large cap, mid-cap, small-cap and international stocks. The proportion of investment in different stocks will be determined by your risk-return profile.

If you are risk-averse, go for blue chip stocks only. If you are apt at online share trading , invest more in riskier stocks. The shares of mid-sized and small-sized companies are riskier than shares of large-sized companies. Unfollow herd mentality.

An optimal portfolio should comprise stock derivatives too. Derivatives are perfect instruments for hedging your risks. You can limit your losses in the share/forex market by buying stock options or futures.

As you gain expertise, you can take full advantage of arbitrage opportunities in the share and derivative markets by opting for more complicated derivative instruments like swaps, swaptions etc. Proper use of option trading strategies that involve combinations of long and put options too will help you make capital gains. As the strong form of Efficient Market Hypothesis is a myth in reality, you have ample arbitrage opportunities in the financial markets.

4. Invest regularly

Compounding will lose its charm if you do not annually invest a portion of your income in shares.

One of the principles of stock investing says that buy shares when prices are low and sell them off when prices are high. If you are not good at timing your investments, opt for Systematic Investment Plan (SIP) of equity funds